Fire and Police Pension Association Statewide Death & Disability Plan Actuarial Valuation Report for the Year Beginning January 1, 2018

Transcription

1 Actuarial Valuation Report for the Year Beginning January 1, 2018

2 June 30, 2018 Board of Directors 5290 DTC Parkway, Suite 100 Greenwood Village, Colorado Re: Actuarial Valuation of the FPPA (the Plan) as of January 1, 2018 Dear Members of the Board: We are pleased to present our Report on the actuarial valuation of the Statewide Death & Disability Plan for the (FPPA) as of January 1, We certify that the information included herein and contained in our 2018 Actuarial Valuation Report is accurate and fairly presents the actuarial position of the FPPA Statewide Death & Disability Plan as of January 1, Our Report presents the results of the January 1, 2018 actuarial valuation of the FPPA Statewide Death & Disability Plan (D&D). The report describes the current actuarial condition of the D&D, determines the appropriateness of the contribution rate for certain members, and analyzes changes since the last valuation. The results presented herein may not be applicable for other purposes. Valuations are prepared annually, as of January 1 st, the first day of the FPPA plan year. Financing Objectives Contribution rates are established by law as a percentage of payroll. The contributions are intended to finance the future benefits payable from the Plan using a modified version of the aggregate actuarial cost method. Progress toward Realization of Financing Objectives The unfunded actuarial accrued liability and the funded ratio (ratio of the actuarial value of assets to the net present value of benefits) illustrate the progress toward the realization of certain financing objectives. Based on our actuarial valuation as of January 1, 2018, the Plan has current assets greater than current liabilities by $0.5 million assuming no allowance for future discretionary benefit adjustments for non-totally disabled benefit recipients.

3 Members of the Board June 30, 2018 Page 2 The Board increased the annual contribution rate for members hired on or after January 1, 1997 to 2.70% effective January 1, The contribution rate for these members can only be adjusted every two (2) years. Based on smoothed assets, the cost of providing benefits is 2.69%, therefore, the current 2.70% contribution rate is adequate to provide a material level of future discretionary benefit adjustments. Benefit provisions All of the benefit provisions reflected in this valuation are those which were in effect on January 1, There were no changes in provisions since the prior valuation. The benefit provisions are summarized in Appendix B of our Report. Assumptions and methods The current actuarial methods and assumptions were adopted by the Board of Directors of FPPA for first use in the actuarial valuation as of January 1, 2016, based upon the actuary s analysis and recommendations from the 2015 Experience Study. For information regarding the rationale for the assumptions chosen, please see the experience study report dated June 1, There have been no changes in assumptions or methods since the prior valuation. The assumptions and methods are detailed in Appendix A of our Report. The Board of Directors has sole authority to determine the actuarial assumptions used for the Plan. The assumptions that are based upon the actuary s recommendations are internally consistent and are reasonably based on the actual past experience of the Plan. The actuarial assumptions represent estimates of future experience and are not market measures. The results of any actuarial valuation are dependent upon the actuarial assumptions used. Actual results (and future measures) can and almost certainly will differ, as actual experience deviates from the assumptions. Even seemingly minor changes in the assumptions can materially change the liabilities, calculated contribution rates and funding periods. The actuarial calculations presented in this Report are intended to provide information for rational decision making. Data FPPA supplied data for active and disabled members as of January 1, We did not audit this data, but we did apply a number of tests to the data, and we have concluded that the data is reasonable and consistent with the prior year's data. FPPA also supplied asset data as of January 1, 2018.

4 Members of the Board June 30, 2018 Page 3 GASB Accounting The Governmental Accounting Standards Board (GASB) Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (Issued 6/2015), has replaced the requirements under GASB Statement No. 43, effective for financial statements for fiscal years beginning after June 15, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (Issued 6/2015), has replaced GASB Statement No. 45, effective for fiscal years beginning after June 15, Plan reporting information for GASB Statement No. 74 can be found in the FPPA Comprehensive Annual Financial Report at FPPA's website - FPPAco.org. There will be no employer reporting for GASB Statement No. 75 as all contributions to the FPPA are made by members or on behalf of members. Projected Actuarial Results The following table shows the Funded Ratio (FR) and Annual Required Contribution (ARC) projected over the next five years given alternative investment returns on the market value of assets. With the exception of the market value investment returns, the projections beyond 2018 are based on the same assumptions, methods and provisions used for the January 1, 2018 valuation. January 1, 5-Year Deterministic Projection Market Value Investment Return 3.50% 7.50% 11.50% FR ARC FR ARC FR ARC % 2.69% 100.1% 2.69% 100.1% 2.69% % 2.71% 100.7% 2.67% 101.5% 2.63% % 2.75% 101.3% 2.64% 103.6% 2.53% % 2.84% 101.8% 2.62% 106.5% 2.40% % 2.96% 102.3% 2.59% 110.1% 2.23% % 3.11% 102.3% 2.59% 113.9% 2.04% Due to the limited scope of our assignment, we did not perform an analysis of the potential range of future actuarial measurements other than that shown above.

5 Members of the Board June 30, 2018 Page 4 Certification All of our work conforms with generally accepted actuarial principles and practices, and to the Actuarial Standards of Practice issued by the Actuarial Standards Board. In our opinion, our calculations also comply with the requirements of Colorado state law and, where applicable, the Internal Revenue Code, ERISA, and the Statements of the Governmental Accounting Standards Board. The undersigned are independent actuaries and consultants. Joseph Newton and Dana Woolfrey are Enrolled Actuaries and all are Members of the American Academy of Actuaries, and meet the Qualification Standards of the American Academy of Actuaries. Finally, all of the undersigned are experienced in performing valuations for large public retirement systems. Respectfully submitted, Gabriel, Roeder, Smith & Company Joseph P. Newton, FSA, EA, MAAA Pension Market Leader and Actuary Dana Woolfrey, FSA, EA, MAAA Consultant and Actuary Linna Ye, ASA, MAAA Actuary

6 Table of Contents Section I Executive Summary... 2 Section II Discussion... 5 Section III Tables PAGE 1 Development of Unfunded Actuarial Accrued Liability Actuarial Present Value of Future Benefits Actuarial Gain/(Loss) on UAAL Summary of Historical Valuation Results Allocation of Plan Assets at Fair Value Reconciliation of Plan Net Assets Development of Actuarial Value of Assets Investment Yields Gain/(Loss) on Actuarial Value of Assets History of Investment Return Rates Schedule of Funding Progress Solvency Test Cash Flow Analysis Membership Data Historical Summary of Active Member Data Distribution of Active Members by Age and by Years of Service as of December 31, Schedule of Retirants & Annuitants Added to & Removed from Rolls Summary of Members and Adjusted Payroll by Employer Summary of Inactive Members Appendix A Summary of Actuarial Methods and Assumptions Appendix B Summary of Benefit Provisions Section IV Supplemental Studies Supplemental Studies Section V Section V

7 SECTION I EXECUTIVE SUMMARY

8 Executive Summary Item January 1, 2018 January 1, 2017 Membership Number of: - Active members 12,214 11,975 - Total disabled members & beneficiaries Occupational disabled members & beneficiaries Survivors of deceased active members Total 13,399 13,086 Annualized payroll supplied by FPPA $ 947,520 $ 917,100 Recommended contribution rates for members hired on or after January 1, 1997 and members covered by Social Security 2.70% 2.70% Assets Market value $ 403,693 $ 360,747 Actuarial value $ 395,302 $ 374,944 Rate of return on market value 14.7% 5.2% Rate of return on actuarial value 8.1% 6.3% Contribution for prior year $ 20,535 $ 18,216 Ratio of actuarial value to market value 97.9% 103.9% Actuarial Information Unfunded actuarial accrued liability/(surplus) $ (528) $ (17,028) GASB funded ratio 100.1% 104.8% Note: Dollar amounts in $000 3

9 Executive Summary 1. The annual contribution rate for members hired on or after January 1, 1997 and for members covered by Social Security is 2.7% as of January 1, This rate was last increased from 2.6% to 2.7% as of January 1, Based on the January 1, 2016 valuation, the Board elected to increase contribution rate from 2.6% to 2.7% beginning January 1, The number of total members increased from 13,086 in 2017 to 13,399 in 2018, an increase of 2.4%. 4. Current plan benefits provide an automatic annual 3.0% benefit adjustment to totally disabled members and their beneficiaries but assume no future benefit adjustments for other members. Based on actuarial estimations, the current 2.7% contribution rate could sustain a 0.01% permanent annual benefit adjustment. 5. The plan assets at the valuation date are in excess of the net present value of benefits by $0.5 million. This surplus position compares to the $17 million surplus position last year. The Plan is fully funded assuming no future discretionary benefit adjustments for non-totally disabled benefit recipients. 6. Assets earned 14.7% on a market basis and 8.1% on an actuarial basis in 2017, producing an actuarial gain of $2.1 million. 7. The funded ratio decreased from 104.8% to 100.1% as of January 1, The following chart shows the history of the (Unfunded Actuarial Accrued Liability)/Surplus as of past historical valuation dates. The dollar values are in millions. Historical (UAAL)/Surplus $80 $60 $40 $20 $0 $(20) $(40) $(60) Million $15 $16 $21 $35 $33 $40 $47 $16 $17 $0.5 4

10 SECTION II DISCUSSION

11 Contribution Requirements The valuation of the (D&D) as of January 1, 2018, reflects a current employee contribution rate of 2.7% for members hired on or after January 1, By statute, this rate can change only every two years. The following graph shows the historical contribution rates for employees hired on or after January 1, 1997 and for members covered by Social Security. History of Contribution Rates Effective January 1, 2.8% 2.6% 2.4% 2.2% % 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.7% 2.7% The cost of providing benefits is 2.69% (with no future benefit adjustments for non-totally disabled benefit recipients), therefore, the current 2.70% contribution rate is adequate to provide some level of future benefit adjustments. We recommend the Board take a conservative policy towards providing discretionary benefit adjustments over the short term. Discretionary Benefit Adjustments On October 1 st of each year, annuitants may receive a benefit increase at the discretion of the Board of Directors. Totally disabled members and their beneficiaries receive an automatic increase each year of 3%. For other annuitants, the increase may reflect CPI, but in no case may be higher than 3%. Because the increases are purely discretionary, the valuation results in the report are shown assuming no discretionary benefit adjustments are granted to annuitants other than total disability retirees. The current 2.70% contribution could sustain a 0.01% permanent annual benefit adjustment. The cost of a one-year 0.01% benefit adjustment for current annuitants (excluding totally disabled) is $27,000. The $27,000 cost represents the present value of additional benefits that would be payable for the remaining lifetime of the current annuitants due to the one-time increase. 6

12 Historical Benefit Adjustments Granted 5% 4% 3% 2% 1% 0% -1% * Granted Adjustment** 0.40% 0.00% 0.50% 0.80% 0.70% 0.86% 0.96% 0.30% 0.29% Prior Year CPI-W 4.10% -0.70% 2.10% 3.60% 2.10% 1.40% 1.50% -0.40% 1.00% 2.10% *2018 amount still to be determined. **Total disability annuitants and their survivors receive an automatic annual Benefit Adjustment of 3.0%. Financial Data and Experience This section provides an analysis of the change in Plan Net Assets during the year and an estimate of the yield on mean assets of D&D. FPPA provided GRS with a summary of plan assets as of January 1, The market value of assets reported was $403.7 million as of January 1, 2018, as compared to $360.7 million as of January 1, Table 6 shows data from some of the tables included in the annual financial statements of the Plan. Table 8 shows the estimated yield on a market value basis and on the actuarial asset valuation method. The asset valuation method uses a five-year phase in of the excess/(shortfall) between expected investment return and actual income. Expected earnings used to project the actuarial value are determined using the assumed investment return rate and the beginning of year actuarial value of assets (adjusted for receipts and disbursements during the year). The returns are computed net of administrative and investment expenses. Table 7 shows the development of the actuarial value of assets. The actuarial value of assets increased from $374.9 million to $395.3 million since the prior valuation. This increase was more than expected and produced a gain of approximately $2.1 million. Effective January 1, 2012, the valuation assumed investment return was reduced from 8.0% to 7.5% per year. As indicated by item 6b of Table 8, the estimated return on mean market value was 14.73% in 2017; higher than the assumed 7.5% return. The actuarial asset value returned 8.07%, compared to 6.34% in This difference in the estimated return on market value and actuarial value illustrates the smoothing effect of the asset valuation method. 7

13 History of MVA vs AVA As of the valuation date January 1, $500 $400 $300 $200 $100 $ MVA $214 $252 $280 $276 $302 $339 $354 $352 $361 $404 AVA $257 $266 $282 $291 $305 $325 $345 $361 $375 $395 $ in millions MVA AVA AVA: Actuarial (Smoothed) Value of Assets MVA: Market Value of Assets Demographic Experience During the year, the plan had more disablements than expected (67 actual vs expected) and less active member deaths than expected (8 actual vs. 8.2 expected). The plan had more annuitant deaths than expected (18 actual vs expected). The combination of these experiences created an overall liability loss. Member Data FPPA supplied member data as of January 1, While we did not audit this data, we did perform various tests to ensure that it was internally consistent, consistent with the prior year s data, and was reasonable overall. Information provided for active members includes: name, member ID, sex, a code indicating whether the member was active or inactive, date of birth, service, salary, accumulated member contribution, and the accumulated stabilization reserve account. For retired members, data includes: name, member ID, sex, date of birth, date of retirement, amount of benefit, a code indicating the option elected and the type of retiree (total disability retirees, occupational disability retirees, beneficiary), and if applicable, the joint pensioner s date of birth and sex. For local Money Purchase members, an array based on service was used to estimate each member s Money Purchase balance. For missing salary in the data, an array of salaries based on service was used to estimate the salary. 8

14 Table 17 shows the number of members by category (active, inactive, retired, etc.). Table 18 shows a historical summary of active member statistics, and Table 19 shows the distribution of active members by age and service. The total payroll shown on the statistical tables is the amount that was supplied by FPPA. For the cost calculations, the pays were adjusted in accordance with the actuarial assumptions to reflect one year s salary increase. 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 History of Counts: Active vs In Payment As of the valuation date January 1, Active 11,157 11,077 10,903 10,958 11,076 11,341 11,391 11,681 11,975 12,214 In Payment ,020 1,063 1,111 1,185 Active In Payment Benefit Provisions Appendix B in Section IV includes a summary of the benefit provisions for FPPA. Highlights include: - Pre-Retirement Death Benefits: o Off-duty: 40% of the base salary paid to the member prior to death, with an additional 10% of base salary if a surviving spouse has two or more dependent children. o On-duty: 70% of the base salary paid to the member prior to death. - Disability Benefits: o Total Disability: 70% of the base salary preceding disability. o Permanent Occupational Disability: 50% of the base salary preceding disability. o Temporary Occupational Disability: 40% of the base salary preceding disability for up to 5 years. 9

15 - Contributions: Members hired after January 1, 1997 and members covered by Social Security currently contribute 2.7% of pay. - Benefit adjustments are granted periodically at the discretion of the FPPA Board. Total disability retirees receive an automatic increase of 3%. For other annuitants, the increase may reflect CPI, but in no case may be higher than 3%. There are no ancillary benefits e.g., cost of living benefits that are currently provided by a source independent of FPPA but that might be deemed an FPPA liability if continued beyond the availability of funding by the current funding source. Actuarial Methods and Assumptions The valuation was prepared using the Aggregate Method. This is the same funding method that has been used in prior years. The asset valuation method uses a five-year phase in of the excess (shortfall) between expected investment return and actual income. See Appendix A for a complete description of this method. The actuarial value of future benefits from the Plan is based on several economic and noneconomic assumptions. These are summarized in Appendix A as well. The economic assumptions include investment return and salary increases. Non-economic assumptions include rates of mortality, disability, and separation. There have been no changes to the assumptions and methods since the prior valuation. The results of the actuarial valuation are dependent on the actuarial assumptions used. Actual results can and almost certainly will differ, as actual experience deviates from the assumptions. For FY2017, the actual salary increases were 98.1% of expected. The following charts provide a comparison of the actual experience versus the expected experience for selected assumptions. Demographic Experience - FY2017 In Payment Termination Active Disability Active Death Expected Actual The In Payment Terminations above include deaths and benefits that were canceled for other reasons such as recovery. 10

16 GASB and Funding Progress The governmental Accounting Standards Board (GASB) Statement No.74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (GASB 74), has replaced the requirements under GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (GASB 43), effective for financial statements for fiscal years beginning after June 15, The governmental Accounting Standards Board (GASB) Statement No.75, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (GASB 75), has replaced the requirements under GASB Statement No. 45, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans (GASB 45), effective for financial statements for fiscal years beginning after June 15, Plan reporting information for GASB 74 can be found in the FPPA Comprehensive Annual Financial Report at FPPAco.org. There will be no employer reporting for GASB 75 as all contributions to the FPPA are made by members or on behalf of members. Although it will no longer be required for financial reporting purpose, we have continued to include Table 11a (shows a historical summary of the funded ratios and other information for FPPA). In addition, we have included a Schedule of Funding Progress in Table 11b based on the Entry Age Normal cost method as required for plans using the Aggregate Cost Method. For FPPA, the employer Annual Required Contribution for 2017 is 0%. For members hired on or after 1/1/97 and for members covered by Social Security the member contribution rate is 2.7% of pay. The 2.7% became effective January 1, $600 History of AAL vs AVA As of the valuation date January 1, $400 $200 $ AAL $242 $251 $261 $256 $272 $285 $298 $345 $358 $395 AVA $257 $266 $282 $291 $305 $325 $345 $361 $375 $395 $ in millions AAL AVA The AAL referenced in the chart is the Actuarial Accrued Liability as referenced throughout the report. 11

17 Significant Factors Affecting Trends in Actuarial Information Investment returns during 2017 created actuarial investment gains for the Plan. Outstanding deferred investment gains will put upward pressure on the funded ratio in future valuations if not offset by future losses. Risk Metrics The Statewide Death and Disability Plan provides death and disability benefits to members covered under the, Statewide Hybrid Plan, Colorado Springs New Hire Plans, the Statewide Money Purchase Plan and Local Money Purchase and Defined Benefit Plans. The Plan is funded through payroll contributions on active member payroll for members hired on or after January 1, Benefits for members hired before 1997 were previously funded by the State. The contributions made for this group were considered to fulfill the State s funding obligation, and no further contributions are anticipated. Accordingly, the Calculated Contribution is calculated as a percentage of contributory (post-1996 hire) payroll. As pre-1997 hires terminate and are replaced by contributory members, the contributory portion of the active population grows. This results in the contributory payroll growing faster than the liabilities and assets. This deleveraging can be observed in the historical data. Although the Plan s contributory payroll is growing, because the Plan is funded through employee contributions, there is less tolerance for contribution rate volatility. Eventually the active population will become largely contributory and the contributory payroll will not grow at the same rate. At that point (expected to be about 10 years out), the trend will reverse and the Plan will start to become more leveraged. Calculated Increase Change AVA as AAL (EAN) as Contribution in ARC Funded in Funded Ratio Valuation % of Contributory % of Contributory % of Contributory if Assets Ratio if Assets Year Payroll Payroll Payroll Decrease 10% (EAN) Decrease 10% % 48% 0.98% 0.69% 164.5% -16.4% % 48% 2.31% 0.63% 126.3% -12.6% % 47% 2.32% 0.47% 123.3% -12.3% % 49% 2.23% 0.48% 122.4% -12.2% % 52% 1.98% 0.50% 114.6% -11.5% % 52% 2.05% 0.51% 111.5% -11.1% % 52% 1.97% 0.51% 112.3% -11.2% % 52% 1.89% 0.52% 110.8% -11.1% % 53% 2.37% 0.51% 104.0% -10.4% % 53% 2.48% 0.49% 100.7% -10.1% % 52% 2.69% 0.49% 95.8% -9.6% Market Value Results Investment gains or losses are smoothed over five years, and currently, the smoothed or actuarial value of assets is 97.92% of the market value. If the Funded Ratio and Calculated Contribution had been measured using the Market Value of Assets, they would be 102.3% and 2.59% of payroll, respectively. 12

18 SECTION III TABLES

19 Table 1 - Development of Unfunded Actuarial Accrued Liability January 1, 2018 January 1, Covered payroll for upcoming year $ 976,602,993 $ 942,821, Present value of future pay a. Total $ 8,603,719,157 $ 8,297,042,458 b. Contributory (Hired on or after January 1, 1997) 8,087,191,332 7,700,418, Present value of benefits for active members a. Future occupational disabilities $ 165,956,184 $ 161,766,374 b. Future total disabilities 43,167,820 41,339,576 c. Future active deaths 37,193,909 35,871,645 d. Total for actives $ 246,317,913 $ 238,977, Total present value of benefits a. Current disabled members $ 315,102,623 $ 287,455,996 b. Current beneficiaries of deceased members 31,490,388 30,923,169 c. Active members (Item 3d) 246,317, ,977,595 d. Total $ 592,910,924 $ 557,356, Unfunded actuarial accrued liability (UAAL)/(surplus) a. Present value of benefits $ 592,910,924 $ 557,356,760 b. Present value of administrative costs 20,217,978 8,470,460 c. Less present value of future contributions (2.7%/2.7%) (218,354,166) (207,911,300) d. Less actuarial value of assets (395,302,474) (374,943,903) e. UAAL/(surplus) $ (527,738) $ (17,027,983) 6. a. Current Contribution 2.70% 2.70% b. Calculated Contribution (Aggregate Funding) [(5.a + 5.b + 5.d)/2.b] 2.69% 2.48% c. Difference (a. - b.) 0.01% 0.22% 14

20 Table 2 - Actuarial Present Value of Future Benefits January 1, 2018 January 1, Active members a. Total disability $ 43,167,820 $ 41,339,576 b. Occupational disability 165,956, ,766,374 c. Off-duty death 25,542,957 24,720,907 d. On-duty death 11,650,952 11,150,738 e. Total $ 246,317,913 $ 238,977, Members in pay status a. Total disabled $ 80,597,844 $ 75,194,539 b. Occupationally disabled 234,504, ,261,457 c. Survivors 31,490,388 30,923,169 d. Total $ 346,593,011 $ 318,379, Total actuarial present value of future benefits $ 592,910,924 $ 557,356,760 B. With Permanent 3% COLA 15

21 Table 3 - Actuarial Gain/(Loss) on UAAL For the year ending December 31, Unfunded actuarial accrued liability (UAAL) as of January 1 $ (17,027,983) $ (16,288,416) 2. Interest on UAAL for one year (1,277,099) (1,221,631) 3. Expected UAAL as of December 31 (1 + 2) (18,305,082) (17,510,047) 4. Change in Unfunded Liability due to: a. Benefit Changes 0 (7,724,602) b. Method Change in allocating Administrative Expenses 11,322, Expected UAAL as of December 31 (6,983,014) (25,234,649) after changes in assumption, methods and plan provisions 6. Actual UAAL as of December 31 (527,737) (17,027,983) 7. Actuarial gain/(loss) for the period (5-6) (6,455,277) (8,206,666) SOURCE OF GAINS/(LOSSES) 8. Asset gain/(loss) (See Table 9) 2,097,640 (4,146,064) 9. Salary liability gain/(loss) for the period 635,273 (449,697) 10. Benefit adjustment granted as of October 1 (0.29% in 2017, 0.30% in 2016) (705,235) (679,703) 11. Net liability gain/(loss) for the period ( ) (8,482,955) (2,931,202) Note: Change in the Unfunded Liability due to Benefit Changes for the year ending December 31, 2016 reflects the change in member contribution rate from 2.6% to 2.7% 16

22 Table 4 - Summary of Historical Valuation Results As of the Valuation Date January 1, Number of members a. Active 12,214 11,975 11,681 11,391 11,341 11,076 10,958 10,903 11,077 11,157 b. Disabled 1, c. Survivor d. Total 13,399 13,086 12,744 12,411 12,309 12,004 11,839 11,756 11,889 11, Covered payroll (prior year) $ 947,520 $ 917,100 $ 863,106 $ 827,633 $ 810,578 $ 787,010 $ 755,952 $ 750,497 $ 751,781 $ 729, Average compensation $ 77,577 $ 76,585 $ 73,890 $ 72,657 $ 71,473 $ 71,055 $ 68,986 $ 68,834 $ 67,869 $ 65, Covered payroll for upcoming year $ 976,603 $ 942,822 $ 886,802 $ 844,536 $ 834,268 $ 833,177 $ 801,017 $ 802,802 $ 806,605 $ 785, Actuarial value of assets $ 395,302 $ 374,944 $ 361,070 $ 345,009 $ 325,181 $ 305,455 $ 290,988 $ 281,577 $ 266,478 $ 257, Market value of assets $ 403,693 $ 360,747 $ 351,520 $ 353,776 $ 339,347 $ 301,653 $ 275,873 $ 279,882 $ 251,923 $ 214, Present value of benefits a. Actives $ 246,318 $ 238,978 $ 225,012 $ 201,711 $ 203,254 $ 198,232 $ 192,101 $ 214,708 $ 218,346 $ 217,161 b. Disabled 315, , , , , , , , , ,846 c. Survivors 31,490 30,923 30,430 25,703 26,290 25,700 23,036 22,180 22,413 20,894 d. Total $ 592,911 $ 557,357 $ 521,228 $ 470,593 $ 450,900 $ 428,778 $ 404,340 $ 405,952 $ 396,385 $ 382, Calculated Contribution 2.69% 2.48% 2.37% 1.89% 1.97% 2.05% 1.98% 2.23% 2.32% 2.31% $ amounts in 000s 17

23 Table 5 - Allocation of Plan Assets at Fair Value Actual Allocation January 1, 2018 Target Allocation 1. Global Equity 38.3% 37.0% 2. Equity Long/Short 8.9% 9.0% 3. Absolute Return 9.4% 9.0% 4. Illiquid Alternatives 22.3% 24.0% 5. Managed Futures 4.0% 4.0% 6. Fixed Income 15.3% 15.0% 7. Cash 1.8% 2.0% 100.0% 100.0% Fixed Income, 15.3% Asset Allocation as of January 1, 2018 Cash, 1.8% Managed Futures, 4.0% Global Equity, 38.3% Illiquid Alternatives, 22.3% Absolute Return, 9.4% Equity Long/Short, 8.9% 18

24 Table 6 - Reconciliation of Plan Net Assets Year Ending December 31, 2017 December 31, Market value of assets at January 1 $ 360,747,296 $ 351,519, Revenue for the year a. Contributions i. Member contributions $ 3,547,592 $ 3,170,693 ii. Employer contributions * 16,987,830 15,045,423 iii. Contributions from the SWDD Plan 0 0 b. Net investment income i. Interest $ 1,032,766 $ 972,037 ii. Dividends 2,736,311 2,726,640 iii. Net change in accrued income 227,096 (16,302) iv. Unrealized gain/(loss) 31,704,177 8,671,163 v. Realized gain/(loss) 17,155,015 7,842,888 vi. Investment expense (3,641,523) (3,693,993) vii. Other Income 3,235,375 1,458,275 c. Total revenue $ 72,984,639 $ 36,176, Expenditures for the year a. Benefit payments and refunds $ (28,157,074) $ (26,187,814) b. Administrative expense (1,881,829) (761,530) c. Total expenditures $ (30,038,903) $ (26,949,344) 4. Increase in net assets (Item 2c + Item 3c) $ 42,945,736 $ 9,227, Market value of assets at December 31 (Item 1 + Item 4) $ 403,693,032 $ 360,747,296 *All contributions are made by members or on behalf of members 19

25 Table 7 - Development of Actuarial Value of Assets 1. Actuarial value of assets at beginning of year $ 374,943, Net new investments a. Contributions $ 20,535,422 b. Benefit payments (28,157,074) c. Administrative expenses (1,881,829) d. Net cash flow $ (9,503,481) 3. Assumed investment return rate for fiscal year 7.5% 4. Assumed investment return for fiscal year $ 27,764, Expected Actuarial Value at end of year $ 393,204, Market value of assets at end of year $ 403,693, Excess return (6-5) $ 10,488, Development of amounts to be recognized as of December 31, 2017: Fiscal Year End Remaining Deferrals of Excess/(Shortfall) of Offsetting of Net Deferrals Years Recognized for Investment Income Gains/(Losses) Remaining Remaining this valuation Remaining after this valuation (1) (2) (3) = (1) + (2) (4) (5) = (3) / (4) (6) = (3) - (5) 2013 $ 0 $ 0 $ 0 1 $ 0 $ (7,162,945) 7,162, (7,033,662) 7,033, ,684,805 (14,196,607) 10,488, ,097,640 8,390,558 Total $ 10,488,198 $ 0 $ 10,488,198 $ 2,097,640 $ 8,390, Actuarial value of assets as of December 31, 2017 (Item 6 - Item 8) $ 395,302, Ratio of actuarial value to market value 97.9% Amounts in column (1) for fiscal years ending 2013 through 2016 are from the prior valuation. The column (1) amount for fiscal year 2017 is developed using item 7 less the total of column (1) for fiscal years ending 2013 through To the extent possible, the 2017 excess or shortfall is used to reduce prior bases. In this case, both the 2015 and 2016 base were offset by the gains in The fiscal year 2013 and 2014 bases are $0 because they were previously offset. 20

26 Table 8 - Investment Yields Item Market Value Actuarial Value 1. Assets as of January 1, 2017 (A) $ 360,747,296 $ 374,943, Contributions during FY17 20,535,422 20,535, Benefit payments and administrative expenses during FY17 (30,038,903) (30,038,903) 4. Investment return during FY17 52,449,217 29,862, Assets as of January 1, 2018 (B): ( ) $ 403,693,032 $ 395,302, Approximate rate of return on average invested assets a. Net investment income (I) $ 52,449,217 $ 29,862,052 b. Estimated return based on (2I / (A + B - I)) 14.73% 8.07% 21

27 Table 9 - Gain/(Loss) on Actuarial Value of Assets Valuation as of Valuation as of Item January 1, 2018 January 1, Actuarial assets, prior valuation $ 374,943,903 $ 361,070, Total contributions since prior valuation $ 20,535,422 $ 18,216, Benefit payments and administrative expenses since prior valuation $ (30,038,903) $ (26,949,344) 4. Assumed net investment income at 7.5% a. Beginning assets $ 28,120,793 $ 27,080,281 b. Contributions 770, ,104 c. Benefit payments and administrative expenses (1,126,459) (1,010,600) d. Total $ 27,764,412 $ 26,752, Expected actuarial assets ( d) $ 393,204,834 $ 379,089, Actual actuarial assets, this valuation $ 395,302,474 $ 374,943, Asset gain/(loss) since prior valuation (6-5) $ 2,097,640 $ (4,146,064) Gain Loss 22

28 Table 10 - History of Investment Return Rates For Fiscal Year Ending Market Value Actuarial Value December 31, 2008 (29.34%) (13.20%) December 31, % 5.19% December 31, % 7.68% December 31, % 5.33% December 31, % 7.06% December 31, % 8.67% December 31, % 8.41% December 31, % 6.80% December 31, % 6.34% December 31, % 8.07% Average Returns Last 5 Years 8.38% 7.65% Last 10 Years 4.85% 4.83% History of Asset Returns 25% 15% 5% -5% -15% -25% -35% Market Return Actuarial Return 23

29 Table 11a - Schedule of Funding Progress Based on the Aggregate Funding Method Unfunded Actuarial Actuarial Value Actuarial Accrued Accrued Liability Funded Ratio Annual UAAL as % of Date of Assets (AVA) Liability (AAL) (UAAL) (3) - (2) (2)/(3) Payroll Payroll (4)/(6) (1) (2) (3) (4) (5) (6) (7) January 1, 2007 $ 274,091,581 $ 258,243,478 $ (15,848,104) 106.1% $ 631,667,107 (2.5%) January 1, ,642, ,999,678 (76,643,044) 134.2% 679,223,009 (11.3%) January 1, ,279, ,813,411 (15,466,086) 106.4% 740,172,854 (2.1%) January 1, ,477, ,709,436 (15,768,440) 106.3% 758,113,476 (2.1%) January 1, ,577, ,688,472 (20,888,983) 108.0% 750,497,200 (2.8%) January 1, ,988, ,841,269 (35,147,071) 113.7% 755,952,497 (4.6%) January 1, ,454, ,350,253 (33,104,693) 112.2% 787,009,650 (4.2%) January 1, ,180, ,820,249 (40,360,519) 114.2% 810,578,220 (5.0%) January 1, ,009, ,128,930 (46,880,478) 115.7% 827,633,440 (5.7%) January 1, ,070, ,781,994 (16,288,416) 104.7% 863,105,687 (1.9%) January 1, ,943, ,915,920 (17,027,983) 104.8% 917,099,955 (1.9%) January 1, ,302, ,774,736 (527,738) 100.1% 947,520,430 (0.1%) Limitations of Funded Status Measurements Unless otherwise indicated, a funded status measurement presented in this report is based upon the actuarial accrued liability and the actuarial value of assets. With regard to any funded status measurements presented in this report: (1) The measurement is inappropriate for assessing the sufficiency of plan assets to cover the estimated cost of settling the plan s benefit obligations. (2) The measurement alone is inappropriate for assessing the need for or the amount of future employer contributions. (3) The measurement would produce a different result if the market value of assets were used instead of the actuarial value of assets, unless the market value of assets is used in the measurement. 24

30 Table 11b - Schedule of Funding Progress Based on the Entry Age Normal Funding Method Unfunded Actuarial Actuarial Value Actuarial Accrued Accrued Liability Funded Ratio Annual UAAL as % of Date of Assets (AVA) Liability (AAL) (UAAL) (3) - (2) (2)/(3) Payroll Payroll (4)/(6) (1) (2) (3) (4) (5) (6) (7) January 1, 2009 $ 257,279,496 $ 203,673,786 $ (53,605,710) 126.3% $ 740,172,854 (7.2%) January 1, ,477, ,103,895 (50,373,980) 123.3% 758,113,476 (6.6%) January 1, ,577, ,959,016 (51,618,438) 122.4% 750,497,200 (6.9%) January 1, ,988, ,869,640 (37,118,699) 114.6% 755,952,497 (4.9%) January 1, ,454, ,068,253 (31,386,692) 111.5% 787,009,650 (4.0%) January 1, ,180, ,577,412 (35,603,356) 112.3% 810,578,220 (4.4%) January 1, ,009, ,334,019 (33,675,389) 110.8% 827,633,440 (4.1%) January 1, ,070, ,242,942 (13,827,468) 104.0% 863,105,687 (1.6%) January 1, ,943, ,201,460 (2,742,443) 100.7% 917,099,955 (0.3%) January 1, ,302, ,597,445 17,294, % 947,520, % Limitations of Funded Status Measurements Unless otherwise indicated, a funded status measurement presented in this report is based upon the actuarial accrued liability and the actuarial value of assets. With regard to any funded status measurements presented in this report: (1) The measurement is inappropriate for assessing the sufficiency of plan assets to cover the estimated cost of settling the plan s benefit obligations. (2) The measurement alone is inappropriate for assessing the need for or the amount of future employer contributions. (3) The measurement would produce a different result if the market value of assets were used instead of the actuarial value of assets, unless the market value of assets is used in the measurement. 25

31 Table 12 - Solvency Test Aggregated Accrued Liabilities for Active Retirees Beneficiaries Members Actuarial Portion of Accrued Liabilities Covered by Reported Assets Members and Vested (Employer Value of [(5)-(2)-(3)]/ Valuation Date Contribution Terminations Financed Portion) Assets (5)/(2) [(5)-(2)]/(3) (4) (1) (2) (3) (4) (5) (6) (7) (8) January 1, 2006 $ 0 $ 135,159 $ 123,568 $ 249, % 100% 92% January 1, , , , % 100% 100% January 1, ,614 69, , % 100% 100% January 1, ,740 76, , % 100% 100% January 1, ,039 72, , % 100% 100% January 1, ,243 69, , % 100% 100% January 1, ,239 43, , % 100% 100% January 1, ,546 41, , % 100% 100% January 1, ,646 37, , % 100% 100% January 1, ,883 29, , % 100% 100% January 1, ,216 48, , % 100% 100% January 1, ,379 39, , % 100% 100% January 1, ,593 48, , % 100% 100% $ amounts in 000s 26

32 Table 13 - Cash Flow Analysis Expenditures During the Year External Cash External Cash Year Ending Contributions Benefit Refund of Flow for the Market Value Flow as Percent December 31, for the Year Payments Contributions Expenses Total Year of Assets of Market Value 2006 $ 8,285 $ (13,007) $ 0 $ (1,796) $ (14,803) $ (6,518) $ 286,240 (2.3%) ,902 (13,742) 0 (2,102) (15,844) (5,942) 308,170 (1.9%) ,963 (14,887) 0 (2,192) (17,079) (6,116) 214,400 (2.9%) ,957 (16,010) 0 (1,756) (17,766) (5,809) 251,923 (2.3%) ,259 (17,435) 0 (1,963) (19,398) (7,139) 279,882 (2.6%) ,813 (18,265) 0 (2,175) (20,439) (7,627) 275,873 (2.8%) ,612 (19,482) 0 (2,616) (22,098) (8,486) 301,653 (2.8%) ,570 (21,052) 0 (3,669) (24,721) (10,151) 339,347 (3.0%) ,509 (22,720) 0 (3,791) (26,511) (11,003) 353,776 (3.1%) ,938 (24,097) 0 (4,247) (28,344) (11,406) 351,520 (3.2%) ,216 (26,188) 0 (4,456) (30,643) (12,427) 360,747 (3.4%) ,535 (28,157) 0 (5,604) (33,761) (13,226) 403,693 (3.3%) 2018* 22,401 (29,976) 0 (5,800) (35,776) (13,375) 420,093 (3.2%) 2019* 23,503 (31,821) 0 (6,003) (37,824) (14,321) 436,742 (3.3%) 2020* 24,478 (33,737) 0 (6,214) (39,951) (15,473) 453,444 (3.4%) Results for 2018, 2019, & 2020 are based on expected contributions, expected benefit payments, and assumed investment return of 7.5% Expected contributions are based on applicable employee rate of 2.7% and 3.5% annual payroll growth Expected benefit payments are based on the current plan benefits and expected retirements, terminations, and mortality Assets are assumed to increase at the annual return of 7.5% with all cash flow occurring in the middle of the year $ amounts in '000s 27

33 Table 14 - Membership Data January 1, 2018 January 1, 2017 January 1, Active members a. Number 12,214 11,975 11,681 b. Total payroll $ 947,520,430 $ 917,099,955 $ 863,105,687 c. Average annual salary $ 77,577 $ 76,585 $ 73,890 d. Average age e. Average service Disabled members and beneficiaries a. Number 1, b. Total annual benefits $ 26,013,174 $ 23,703,863 $ 22,002,243 c. Average annual benefit $ 24,587 $ 23,919 $ 23,307 d. Average age Survivors of deceased active members a. Number b. Total annual benefits $ 3,046,277 $ 2,876,276 $ 2,892,842 c. Average annual benefit $ 23,986 $ 23,969 $ 24,310 d. Average age

34 Table 15 - Historical Summary of Active Member Data Valuation Date Active Count Average Age Average Service Covered Payroll Average Annual Salary Percent Change in Average Salary January 1, , $ 596,231,150 $57, % January 1, , ,699,534 58, % January 1, , ,502,284 60, % January 1, , ,723,656 65, % January 1, , ,781,464 67, % January 1, , ,497,200 68, % January 1, , ,952,497 68, % January 1, , ,009,650 71, % January 1, , ,578,220 71, % January 1, , ,633,440 72, % January 1, , ,105,687 73, % January 1, , ,099,955 76, % January 1, , ,520,430 77, % 29

35 Table 16 - Distribution of Active Members by Age and by Years of Service As of December 31, 2017 Years of Credited Service Less than & Over Total Attained Count & Count & Count & Count & Count & Count & Count & Count & Count & Count & Count & Count & Count & Age Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Avg. Comp. Under $48,375 $53,155 $53,198 $53,110 $50, ,294 $51,710 $55,695 $58,113 $62,963 $69,271 $71,939 $57, ,913 $53,430 $57,888 $61,143 $66,626 $70,995 $74,560 $82,589 $65, ,952 $53,778 $58,309 $65,342 $69,499 $74,392 $76,679 $83,432 $88,187 $74, ,889 $61,673 $59,238 $64,630 $69,690 $72,641 $75,867 $84,131 $89,469 $96,560 $95,737 $81, ,166 $62,576 $62,926 $70,706 $69,636 $80,008 $76,627 $83,462 $88,809 $96,039 $100,076 $86, ,468 $66,045 $67,741 $73,864 $69,313 $76,994 $78,643 $84,048 $88,915 $94,686 $100,622 $108,027 $89, $74,261 $66,169 $72,302 $81,751 $87,733 $78,769 $84,610 $90,052 $94,253 $96,414 $106,350 $94,610 $92, $82,635 $86,289 $90,584 $83,337 $70,274 $73,587 $88,420 $86,754 $91,033 $96,802 $97,260 $100,365 $92, & Over $63,648 $56,030 $34,070 $78,891 $85,480 $82,424 $93,699 $92,200 $97,133 $115,028 $85,982 $98,727 $91,169 Total 1,247 1, ,697 2,203 2,003 1, ,214 $53,564 $57,802 $62,594 $67,480 $73,007 $75,862 $83,780 $89,049 $95,162 $99,000 $103,783 $98,680 $77,577 Average: Age: 41.4 Number of participants: Males: 11,027 Service: 11.0 Females: 1,187 30

36 Table 17 - Schedule of Retirants & Annuitants Added to & Removed from Rolls* Added to Rolls* Removed from Rolls Rolls-End of Year % Increase Average Annual Annual Annual in Annual Annual Year Ended Number Benefit Number Benefit Number Benefit Benefit Benefit (1) (2) (3) (4) (5) (6) (7) (8) (9) December 31, $ 1,349, $ 270, $ 12,516, % $ 18,165 December 31, ,061, , ,274, % 18,335 December 31, ,264, , ,281, % 19,118 December 31, ,259, , ,200, % 19,690 December 31, ,537, , ,425, % 20,229 December 31, ,366, , ,606, % 20,640 December 31, ,239, , ,431, % 20,921 December 31, ,721, , ,986, % 21,538 December 31, ,853, , ,498, % 22,209 December 31, ,082, ,192 1,020 23,281, % 22,825 December 31, ,797, ,015 1,063 24,895, % 23,420 December 31, ,098, ,487 1,111 26,580, % 23,925 December 31, ,807, ,332 1,185 29,059, % 24,523 *Includes benefit adjustments 31

37 Table 18 - Summary of Members and Adjusted Payroll by Employer City Police Fire Total Code City Name No. Earnings No. Earnings No. Earnings 550 ADAMS COUNTY FPD 0 $ 0 97 $ 8,388, $ 8,388,418 3 ALAMOSA 24 1,255, ,255,598 4 ALMA 1 51, ,958 5 ANTONITO 1 31, ,200 7 ARVADA ,689, ,689, ARVADA FPD ,640, ,640,427 8 ASPEN 24 1,802, ,802, ASPEN FPD , , AULT FPD , ,100 9 AULT 5 244, , AURORA ,461, ,975,662 1,050 85,437, AVON 18 1,337, ,337, BASALT , , BASALT & RURAL FPD , , BAYFIELD 8 438, , BENNETT FPD # , , BERTHOUD FPD ,635, ,635, BEULAH FIRE PROTECTION & AMBULANCE DISTRICT , , BLACK FOREST FIRE RESCUE , , BLACK HAWK ,627, ,627, BLANCA 1 37, , BOULDER ,461, ,916, ,378, BOULDER MOUNTAIN FPD , , BOULDER RURAL FPD ,190, ,190, BRIGGSDALE FPD , , BRIGHTON 63 4,710, ,710, BRIGHTON (GREATER) FPD ,144, ,144, BROADMOOR FPD , , BROOMFIELD ,560, ,560, BRUSH 9 453, ,130 32

38 Table 18 (continued) - Summary of Members and Adjusted Payroll by Employer City Police Fire Total Code City Name No. Earnings No. Earnings No. Earnings 29 BUENA VISTA 9 $ 480,846 2 $ 91, $ 572, BYERS FPD # , , CANON CITY 35 1,756, ,756, CANON CITY AREA FPD ,126, ,126, CARBONDALE & RURAL FPD ,255, ,255, CASTLE ROCK ,758, ,758, CENTER 7 278, , CENTRAL CITY , , CHAFFEE COUNTY FPD , , CHERRY HILLS FPD (SOUTH METRO FIRE RESCUE) , , CHERRY HILLS VILLAGE 23 1,943, ,943, CIMARRON HILLS FPD , , CLEAR CREEK FIRE AUTHORITY , , CLIFTON FPD , , COAL CREEK CANYON FPD , , COLLBRAN MARSHALS 1 53, , COLORADO RIVER FPD ,534, ,534, COLORADO SPRINGS ,347, ,266,769 1,024 78,614, COLUMBINE VALLEY 6 359, , COMMERCE CITY 91 7,401, ,401, CORTEZ 31 1,590, ,590, CORTEZ FPD , , CRESTED BUTTE FPD , , CRIPPLE CREEK , , DACONO 9 549, , DEBEQUE FPD , , DEBEQUE 4 229, , DEL NORTE 3 137, , DELTA , , DENVER 1, ,348, ,066,116 2, ,414,877 33

39 Table 18 (continued) - Summary of Members and Adjusted Payroll by Employer City Police Fire Total Code City Name No. Earnings No. Earnings No. Earnings 63 DILLON 9 $ 668,048 0 $ 0 9 $ 668, DINOSAUR 1 42, , DONALD WESCOTT FPD , , DURANGO 54 3,575, ,575, DURANGO FPD ,698, ,698, EAGLE RIVER FPD ,600, ,600, EAST GRAND FPD # , , EATON FPD , , EDGEWATER 19 1,209, ,209, ELIZABETH 7 422, , ELIZABETH FPD ,016, ,016, ELK CREEK FPD , , EMPIRE 1 52, , ENGLEWOOD 74 6,139, ,139, ERIE 29 2,110, ,110, ESTES VALLEY FPD , , EVANS 35 2,693, ,693, EVANS FPD , , EVERGREEN FPD , , FAIRMOUNT FPD ,669, ,669, FAIRPLAY MARSHALLS 1 50, , FALCON FPD ,263, ,263, FEDERAL HEIGHTS 22 1,479, ,080, ,560, FIRESTONE 23 1,690, ,690, FLORENCE , , FOOTHILLS FIRE & RESCUE , , FORT COLLINS ,482, , ,575, FORT LEWIS MESA FPD , , FORT LUPTON , , FORT LUPTON FPD ,418, ,418,400 34